We warned in September that Boston Scientific Corp. (NYSE:BSX) was presenting its finances in the best possible rather than the most conservative light. Now the medical device maker has reported another loss in the three months ended Sept. 30 and had to revise its earlier estimates down by $809 million, or almost double what it said it earned during all of 2011.

Boston Scientific’s managers are struggling to navigate the company past challenges ranging from its high debt levels to the weak economy. The company lost $725 million in the September quarter, compared to a $142 million profit during the same period of 2011. Its sales declined year over year in its interventional cardiology and its cardiac rhythm management business units — each of which comprises more than a fourth of Boston Scientific's revenue overall.

CEO Hank Kucheman noted increased competition and on-going market challenges in the company's cardiology business. “We remain focused on executing our strategy to drive this organization back to revenue growth, as evidenced by recent regulatory approvals and acquisitions, and continued progress on our cost optimization initiatives,” he said in a statement Oct. 18. He pointed to recent regulatory approvals for Boston Scientific's subcutaneous implantable defibrillator and its new treatment for Parkinson's disease, along with deals such as its acquisition of the coronary artery disease treatment provider BridgePoint Medical Inc. for an undisclosed amount.

But, as we discussed in our earlier article, financial reporting data results in Boston Scientific having an AGR® score of 2, indicating more accounting and governance risk than 98% of comparable companies. Some of the contributors to the low score continue in the September quarter.

Overhead is one example. Comparably low selling, general and administrative (SG&A) expenses can mean that a company has grown more efficient and profitable in its operations, but managers have the discretion to decide what counts as a cost more directly related to the production of goods. The portion of Boston Scientific's expenses that consisted of overhead dropped significantly year over year as of June 30, after the company took a charge that made its operating expenses zoom up and thus throw comparisons out of whack. And Boston Scientific’s SG&A sank to $589 million in the September quarter from $629 million during the year ago quarter.

Meanwhile the company once again found that it had to revise earlier estimates downward, as it had in the previous quarter. After doing deals such as buying Guidant for around $27 billion in 2006, the company said that the amount it overpaid for such acquisitions amounted to $5.66 billion as of Sept. 30, or nearly 34% of total assets. (The industry median is around 11%, which means rivals tend to have a higher proportion of assets that are more concrete and inarguable.) Boston Scientific said in its annual filing that it tests its April 1 goodwill balances to see if they need updating during the second quarter of each year, or more frequently if circumstances suggest the need to revise earlier estimates might exist.

Given the frequency with which Boston Scientific performs this kind of testing, it’s interesting that the company has stumbled upon so much bad luck lately. On July 26, Kucheman and his team revised their goodwill estimates for the three months ended in June down by more than $3.4 billion, noting “slightly lower projected long-term growth rates due to macroeconomic factors and its performance in the European market” associated with the company’s Europe, Middle East and Africa reporting unit. Now in this recent quarter they once again revised goodwill down by $809 million (subject to finalization expected in the range of $700 million to $900 million), while noting the "reduction in the estimated size" of the U.S. cardiac rhythm management market in which it does business and "other competitive factors" that led to lower projected results compared to prior forecasts.

These hits to earnings will give Michael Mahoney, who takes the role of CEO this Nov. 1, a nice start. Beating the results from the September quarter next year won’t be as tough for him as it might have been.

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